Gopal Sri Ram JCA:

[1] The main, if not the only issue in this appeal is whether the defendant was in breach of contract. The argument urged in support of the appeal is that the High Court's finding to the contrary is flawed. The facts out of which the dispute arose are fairly straight forward and in the main undisputed. Here they are.

[2] The plaintiff (appellant before us) was at all material times a customer of the defendant bank (the respondent before us). It was a member of a group of companies all of whom were also the defendant's customers. Indeed, it cannot be gain said that at all material times the defendant conducted itself towards all these companies as if they were one and the same entity with the defendant looking to the plaintiff as the "flagship" entity to settle any and all monies owed to the defendant by the other companies in the group. The plaintiff's case is that the defendant in breach of contract failed to make available to it funds that it had already promised to the former. In consequence of that breach the plaintiff's housing development, known as "the Taman Dangi project" could not be completed resulting in losses to the plaintiff.

[3] There is no dispute that the plaintiff had three overdraft facilities with the defendant each of which was secured by a charge over the titles to the Taman Dangi land. The total sum made available was RM550,000. The defendant knew that the true purpose of the facility viz. , that it was a bridging facility. That is to say, it was to be used by the plaintiff for the housing development. That comes across quite clearly from the evidence of the defendant's witness DW3 given under cross-examination.

[4] Let me at this stage say a word about the third overdraft facility. This was for a sum of RM150,000. It was a term of the contract between the plaintiff and the defendant that this sum of RM150,000 would be released progressively against an architect's certificates of works done on roads and drainage in respect of the housing development project. Admittedly, the plaintiff only produced architect's certificates for up to RM120,000.

[5] Each of the charges executed by the plaintiff in the defendant's favour contained the following two clauses:

4. Subject always to the provisions of the clause next following the interest on any principal moneys for the time being hereby secured including capitalised interest shall at the end of each calendar month be capitalised and added for all purposes to the principal sum then owing and shall thenceforth bear interest at the Prescribed Rate and be secured and payable accordingly and all the covenants and conditions contained in or implied by these presents and all powers and remedies conferred by law or by these presents and all rules of law or equity in relation to the said principal sum and interest shall equally apply to such capitalised arrears of interest and to interest on such arrears.

5. For the purpose of ascertaining whether the limit of the principal intended to be hereby secured has been exceeded or not all accumulated and capitalized interest shall be deemed to be interest and not principal sum.

These are important provisions. On their plain reading they exclude accumulated interest when determining whether the plaintiff had exceeded the limit of its overdraft. I will deal with the arguments of the parties with regard to these clauses and matters appurtenant to them later in this judgment.

[6] The next item of importance in the chronology of events is a letter from the defendant to the plaintiff that is dated 6 February 1985 and marked as "Final Reminder". It refers to an outstanding sum of RM544,587-86 as at 5 February 1985 and goes on to say this:

We refer to our repeated reminders and note that your account is overdrawn by $ 24,587-86 as at 5-2-1985.

You are requested to regularise your account within 10 days from the date hereof, failing which we shall have no alternative but to institute legal proceedings against you to reco